Unveiling a Debt-Free Software Giant: Profiling a Leader in Digital Transformation

Newgen Software Technologies is a completely debt free 28 years old software company.  With huge, mission-critical systems implemented at the world’s largest banks, governments, BPOs & IT Companies, insurance firms, and healthcare organisations, it delivers Business Process Management, Enterprise Content Management, and Customer Communication Management platforms.

Current Market Price at the time of Publishing this report-: 590 Rs

Incorporated as a private limited company in 1992 it became public limited company in 1997. During the same year Newgen Software Inc., USA was incorporated as a wholly owned subsidiary of the company.

Newgen Software Technologies Limited is a software products firm that provides a platform that enables businesses to quickly construct sophisticated apps that answer their key business goals. Organizations can promote digital transformation and competitive differentiation with the apps built on its platform. This might involve automating typical business operations to make them faster, simpler, and more accurate, as well as expanding the channels or devices via which these functions can be conducted.

Private and public sector organisations can use Newgen Software’s enterprise-grade digital automation technology. Its three primary products are as follows:

1) OmniDocs for contextual content services, geared for the ECM market.

2) iBPS is a low-code process automation platform aimed at the BPM industry.

3) OmniOMS, aimed at the CCM sector, for personalised customer communication.

Customers utilise the company’s platform to quickly design, construct, and launch enterprise-grade bespoke apps using its easy, visual interface and minimum code. Enterprise Content Management (ECM), Business Process Management (BPM), and Customer Communication Management are all part of the Platform (CCM). These suites are well-integrated and provide its clients simplicity of setup and usage because they are based on the same technological architecture. These suites may be implemented both on-premises and in the cloud. Customers are increasingly opting to utilise its product suites in the cloud on a subscription basis.

The Company’s go-to-market strategy includes direct sales as well as sales through channel partners. The Company in India and its Subsidiaries in the United States, United Kingdom, Singapore, and Canada make direct sales through its sales and marketing teams, which numbered over 3000 individuals as of March 2021. As of March 2021, the firm had over 300 channel partners worldwide and over 550 active clients in 72 countries.

Company has around 470+ Employees engaged in R&D. So far company has filed 44 patents till date of which it has received approval for 18. 

Clientele

Trust Company of America, Mercantil Bank, ICICI Bank, Trafigura, Bajaj Electricals, United Arab Bank, National Commercial Bank Jamaica, Axis Bank, Yes Bank, Kotak Mahindra Bank, Bank Islam Brunei Darussalam, Philippines Resource Saving Bank, ICICI Prudential Life Insurance, Reliance General Insurance, Max Life Insurance, Strides Shasun, and Shriram Transport Finance are among its key active customers. The company’s enterprise-wide, mission-critical solutions have been employed by some of the world’s biggest companies in a variety of industries, including banking, government/PSUs, BPO/IT, insurance, and healthcare.

Business / Products

Business as a Platform 

Platform businesses reshape industries by dramatically improving the economics of integration and service delivery. You can participate in a platform economy by exposing capabilities via APIs and adopting partners’ platforms. But to lead, digital business leaders must build services that customers and suppliers embed into their operations’ ~Forrester Research 

With Platform and connecting enterprise a lot can be done such as 

• Automate operations using a digital automation platform that considers the whole customer journey.
• Use service-oriented architectural concepts to design integration-friendly interfaces and services for processes and content. To integrate internal and external processes, provide these interfaces as secure and authentication-based APIs.
• Deploy a low-code digital automation platform to implement agile process management at the corporate level.
• Deploy artificial intelligence (AI)/machine learning (ML) and intelligent rules management systems to increase decision-making flexibility.
• Implement straight-through processing to achieve real-time services through automated end-to-end transactions.
• Contextual content services may be used to manage the whole lifecycle of any type of content (documents or media) and seamlessly integrate into a process automation framework.
• Integrate external interfaces into your digital automation platform to implement omnichannel and cross-channel processes and achieve multi-experience engagement.

That is exactly what Newgen has done. Newgen’s low code digital automation platform integrates various capabilities needed to build a connected enterprise – through its flagship products in intelligent process automation (BPM), contextual content services (ECM), and omnichannel customer engagement (CCM). On one hand, platform helps transform experiences by bridging (process, content, and communication) silos in organization. On the other hand, it offers the agility for sustainable and continuous improvement, thereby future-proofing enterprise. What’s more, is its architectural support for integration and innovation enables to leverage cutting-edge capabilities to stay ahead of the curve. Such capabilities include mobility, social, analytics, cloud, machine learning, robotic process automation, blockchain, and artificial intelligence.

Why Low Code? Why Newgen?

Business needs must be translated into applications, which is a time-consuming and difficult process. As a result, despite the best intentions and efforts of IT teams, a broad range of pressing, even critical, business demands frequently go unfilled. The impedance arises as a result of businesses’ traditional practise of translating business requirements to applications via code.

Coding isn’t a game. It is the delivery of value through composition and integration. A low-code platform with a high level of abstraction decreases the work required to translate a business need into a business application. This is accomplished by modeling-driven point-and-click application development, which may be used by both citizen and professional code developers. 

The modern enterprise is all about speed. 

Some of the driving factors: 

• Fast changing customer behaviours 
• Technology is permeating into every aspect of your enterprise 
• Product life-cycles are shortening from years to months across the board.
• Certain customer-sensitive areas of business mandate an idea-to-execution speed in terms of hours, including PR, marketing cam- paigns, and recall situations . And much more.
  

As per Gartner Research “ IT is no longer just a platform that enables organizations to run their business on. It is becoming the engine that moves the business.”

What does low code bring on table?

A low code platform enables speed in not just one but multiple ways: 

Enable citizen development that is by offering quick solutions for personal or departmental business need with no prior coding experience.

• Reduces IT dependency 
• Support a variety of business and technological needs:
• Support application lifecycle management and DevOps 
• Enables easy scaling up based on the needs of an organisation and much more.

Low Code is a huge interest area right now globally and it’s not kind of a business opportunity on its own but the kind of approach or a strategy or a product capability which most of the digital initiatives are expecting from their vendors. So, products and platforms which have strong Low Code capabilities, have better chance of winning those digital initiatives. So, the way we see this is a very-very large market globally, but also there is a lot of competition in this market. With Newgen being very strong on the process-centric application and the content- centric application, and Low Code capabilities end up providing a very big, differentiated value to the customers. On the funnel side, all cases are Low Code cases for Newgen because this has been the strategy that company has been selling. Of course, it’s been sold through process-centric, process automation sometimes, sometimes intelligent business process management, sometimes digital process automation. So, all of the company’s pipeline will be based on products which are Low Code products. 

“ By 2024, low code application development will be responsible for more than 65% of application development activity.”

Gartner Research

Anybody who wants to develop a digital process, which is process-centric and content-centric, Newgen Software Technologies is one of the best companies in the world to do because of the inherent capabilities that it has. And that’s where Newgen Software Technologies is very strong and is able to differentiate. And then with certain verticals in banking, insurance, government, company has history of servicing customers and the use cases makes it very compelling for customers in these segments.

Financials

For Fy22Q2

• Net Sales at Rs 202.51 crore in December 2021 up 9.16% from Rs. 185.51 crore in December 2020.
• Quarterly Net Profit at Rs. 47.81 crore in December 2021 up 34.98% from Rs. 35.42 crore in December 2020.
• EBITDA stands at Rs. 65.11 crore in December 2021 down 10.02% from Rs. 72.36 crore in December 2020.
• Newgen Software EPS has increased to Rs. 6.89 in December 2021 from Rs. 5.12 in December 2020.
• India, which accounts for 30% of the global topline, has had its second straight quarter of double-digit growth, increasing 13% year on year to INR 608 million. Due to limited government investment and a delayed economic recovery, new contract wins in the geography have been subdued. Sales from existing clients, on the other hand, were strong, supporting growth in Q3FY22.
• In Q3FY22, Newgen earned 17 new logos and 37 in 9MFY22. A significant number of these new deal wins have come from mature markets, in accordance with the management’s aim of increasing exposure to the US, Europe, and Australia, among other places. This will result in a greater contribution to revenue from these areas in the coming 2-3 quarters.

For the year ended Fy 21

• Company witnessed a resilient performance during the fiscal year 2020-21, clocking in revenues of Rs 673 crores. It continued to witness business momentum with expanded customer engagements and an addition of 67 new logos under its umbrella. US is now company’s largest revenue contributor and one of the fastest expanding markets, growing at 16% YoY. 
• During the year, the Company has also adopted a strategic approach to cost management and cash flow optimization.
• Company’s subscription revenues witnessed a growth of 19% during the year. Our overall annuity revenues remained consistent, contributing 57% to the revenues.
• On a consolidated basis, the Company’s income from operations was at Rs 67,262.44 lakh in fiscal year 2020-21, representing a 1.8 percent increase over Rs 66075.62 crore in fiscal year 2019-20.
• Consolidated Profit before Tax for the year was Rs 18,116.70 crore, up from Rs 9474.17 lakh in fiscal year 2020-21, representing a 91.22 percent growth.
• Consolidated Profit after Tax for the year was Rs 12,648.23 lakh, up from Rs 7,273.46 lakh in fiscal year 2020-21, representing a 73.90 percent rise.
• The Board of Directors proposed a dividend payment of Rs 3.5/- per equity share (i.e. 35% of the Company’s paid-up capital) for the fiscal year ending 31st March 2021 (the previous year’s dividend was Rs 2 per equity share). The overall cost of such a payout will be Rs 2448.45 Lakh.
• On a consolidated basis, cash and cash equivalents stood at Rs 7,174.94 Lakh as of March 31, 2021, with Rs 8,317.46 Lakh invested in mutual funds and bonds and Rs 17,000 Lakh in non-current fixed deposits.

Sectorial Outlook

By 2025, distinctive and massive ecosystems (such as, B2B Services, B2C Marketplaces, Education, Housing, Public Services, Wealth & Protection, to name a few) are expected to emerge around fundamental human and organizational needs. These 12 ecosystems will account for $60 trillion in revenues, or roughly 30% of all global revenues.

McKinsey

The Company’s primary addressable markets are roughly defined as low code, global ECM, BPM, and CCM. Newgen has extended its target market even further by establishing solution frameworks in major sectors such as banking, government/PSU, BPO/IT, healthcare, and insurance (addressed as the Application Paas market).

The worldwide content services industry is expected to be worth $7142.8 million in 2019, according to Gartner Market Estimates. 

In 2019, the total low code market is anticipated to be $9152.6 million, with the worldwide intelligent business process management suites market estimated to be $2509.7 million. It predicts that the content services market will increase at a CAGR of 4.3 percent from 2019 to 2025, reaching $9197.9 million in 2025. The total low code market is expected to increase at a 21.2 percent CAGR from 2019 to 2025, reaching $29063.4 million in 2025.

The worldwide intelligent business process management suites market is expected to develop at a CAGR of 7.0 percent by 2025, reaching $ 3758.4 million.

Going Forward

Newgen is projected to expand rapidly in the future. To achieve and sustain growth momentum, the company is pursuing a strategy focused on shifting the revenue model to SaaS/subscription, establishing an additional sales channel through global system integrators (GSIs), expanding operations in developed markets, and streamlining the organisational structure.

After accounting for operational leverage and the return of travel and branding/promotional costs, margins are estimated to stabilise at 25%. Despite the greater DSO, cash flows are solid, paving the way for a substantial cash reserve (of INR3 billion) and a consistent pay-out ratio (of 20%).

Newgen’s addressable market for ECM is $22 billion, $8 billion for BPM, and $2 billion for CCM. One of its competitors, OpenTXT, forecasts an addressable market of US$84 billion, expanding at an 8 percent annual rate.

Some of the strategies adopted by Newgen-:

• Focus on increasing the Annuity Revenue Streams including moving towards increasing cloud deployments.
• Expansion of business and geographical footprint.
• Focus on attractive verticals in select mature markets.
• Expansion of strategic business applications to new verticals

Conclusion

Newgen a completely debt free, cash rich company is also the leading provider of a holistic digital transformation platform that includes native process automation, content services, and communication management. Successful businesses throughout the world rely on Newgen’s industry-recognized minimal code application platform to design and deploy sophisticated, content-driven, and customer-engaging cloud business apps. From onboarding to service requests, loans to underwriting, and many other industry-specific use cases. Simple with speed and agility, Newgen unlocks.

Based on the strong demand for digital transformation and the multiple transitions underway at the company as well as foraying into developed markets can be lead to consist performance over the coming period. With increasing margins and various cost optimisation steps taken by the company it would add additionally to the financials.

It is requested that users should not get lured by such optimistic target prices. All ideas must be explored from a long term perspective only. Last week we had warned users about the market outlook for the current year 2022 and so far Nifty has been down about 600-800 odd points in very short span of time. Even though we have suggested a new darkhorsestock idea we advice users to be cautions and not jump in to buy new ideas.